Isoquant - Meaning and Properties

• Marginal Rate of Technical Substitution
• Law of Returns to Scale

Meaning

An isoquant is a firm’s counterpart of the consumer’s indifference curve. An isoquant is a curve that shows all the combinations of inputs that yield the same level of output. ‘Iso’ means equal and ‘quant’ means quantity. Therefore, an isoquant represents a constant quantity of output. The isoquant curve is also known as an “Equal Product Curve” or “Production Indifference Curve” or Iso-Product Curve.”

The concept of isoquants can be easily explained with the help of the table given below:

Table 1: An Isoquant Schedule

The above table is based on the assumption that only two factors of production, namely, Labor and Capital are used for producing 100 meters of cloth.

Combination A = 5L + 9K = 100 meters of cloth

Combination B = 10L + 6K = 100 meters of cloth

Combination C = 15L + 4K = 100 meters of cloth

Combination D = 20L + 3K = 100 meters of cloth

The combinations A, B, C and D show the possibility of producing 100 meters of cloth by applying various combinations of labor and capital. Thus, an isoquant schedule is a schedule of different combinations of factors of production yielding the same quantity of output.

An iso-product curve is the graphic representation of an iso-product schedule.

Thus, an isoquant is a curve showing all combinations of labor and capital that can be used to produce a given quantity of output.

Isoquant Map

An isoquant map is a set of isoquants that shows the maximum attainable output from any given combination inputs.

Isoquants Vs Indifference Curves

An isoquant is ‘analogous’ to an indifference curve in more than one way. The properties of isoquants are similar to the properties of indifference curves. However, some of the differences may also be noted. Firstly, in the indifference curve technique, utility cannot be measured. In the case of an isoquant, the product can be precisely measured in physical units. Secondly, in the case of indifference curves, we can talk only about higher or lower levels of utility. In the case of isoquants, we can say by how much IQ₂ actually exceeds IQ₁ (figure 2).

Properties of Isoquants

1. An isoquant lying above and to the right of another isoquant represents a higher level of output.

This is because of the fact that on the higher isoquant, we have either more units of one factor of production or more units of both the factors. This has been illustrated in figure 3. In figure 3, points A and B lie on the isoquant IQ₁ and IQ₂ respectively.

At point A we have = OX₁ units of Labor and OY₁ units of capital.

At point B we have = OX₂ units of Labor and OY₁ units of capital.

Though the amount of capital (OY₁) is the same at both the points, point B is having X₁X₂ units of labor more. Therefore, it will yield a higher output.

Hence, it is proved that a higher isoquant shows a higher level of output.

2. Two isoquants cannot cut each other

Just as two indifference curves cannot cut each other, two isoquants also cannot cur each other. If they intersect each other, there would be a contradiction and we will get inconsistent results. This can be illustrated with the help of a diagram as in figure 4.

In figure 4, the isoquant IQ₁ shows 100 units of output produced by various combinations of labor and capital and the curve IQ₂ shows 200 units of output,

On IQ₁, we have A = C, because they are on the same isoquant.

On IQ₂, we have A = B

Therefore B = C

This is however inconsistent since C = 100 and B = 200. Therefore, isoquants cannot intersect.

3. Isoquants are convex to the origin

An isoquant must always be convex to the origin. This is because of the operation of the principle of diminishing marginal rate of technical substitution. MRTS is the rate at which marginal unit of an input can be substituted for another input making the level of output remain the same.

In figure 5, as the producer moves from point A to B, from B to C and C to D along an isoquant, the marginal rate of technical substitution (MRTS) of labor for capital diminishes. The MRTS diminishes because the two factors are not perfect substitutes. In figure 5, for every increase in labor units by (ΔL) there is a corresponding decrease in the units of capital (ΔK).

It cannot be concave as shown in figure 6. If they are concave, MRTS of labor for capital increases. But this is not true of isoquants.

Since MRTS must diminish, the isoquants must be convex to the origin.

4. No isoquant can touch either axis

If an isoquant touches the X-axis it would mean that the commodity can be produced with OL units of labor and without any unit of capital.

Point K on the Y-axis implies that the commodity can be produced with OK units of capital and without any unit of labor. However, this is wrong because the firm cannot produce a commodity with one factor alone.

5. Isoquants are negatively sloped

An isoquant slopes downwards from left to right. The logic behind this is the principle of diminishing marginal rate of technical substitution. In order to maintain a given output, a reduction in the use of one input must be offset by an increase in the use of another input.

Figure 8 shows that when the producer moves from point A to B, the amount of labor increases from OL to OL₁, but the units of capital decreases from OK to OK₁, to maintain the same level of output.

The impossibility of horizontal, vertical or upward sloping isoquants can be shown with the help of the following diagrams.

Consider figure 9(A)

At point A, we have OL units of labor and OK units of capital and at B, we have OL₁ units of labor and OK units of capital.

OL₁ + OK > OL + OK, and so combination B will yield a higher output than A. Therefore, points A and B on the IQ curve cannot represent an equal level of the product. Hence, the isoquant cannot be a horizontal straight line like AB.

Consider figure 9(B)

At point A, we have OL units of labor and OK units of capital. At point B, we have OL units of labor and OK₁ units of capital.

Since B is having KK₁ more units of capital it is wrong to assume that both A and B will yield the same level of output. The conclusion is that the isoquant cannot be a vertical straight line.

Similarly at point B in figure 9(C), we have LL₁ units of more labor and KK₁ units of more capital. As compared to point A, both the inputs are higher at point B. Therefore, it is absurd to assume that both the combinations A and B will give the same level of output.

6. Isoquants need not be parallel

The shape of an isoquant depends upon the marginal rate of technical substitution. Since the rate of substitution between two factors need not necessarily be the same in all the isoquant schedules, they need not be parallel.

7. Each isoquant is oval-shaped

An important feature of an isoquant is that it enables the firm to identify the efficient range of production consider figure 11.

Both the combinations Q and P produce the same level of total output. But the combination Q represents more of capital and labor than P. combinations Q must therefore be expensive and would not be chosen. The same argument can be made to rule out combination T or any other combination lying on a portion of the isoquant where the slope is positive. Positively sloped isoquants imply that an increase in the use of labor would require an increase in the use of capital to keep production constant.

In general, for any input combination on the positively sloped portion of an isoquant, it is possible to find another input combination with less of both the inputs on the negatively convex portion that will produce the same level of output. Therefore, only the negatively sloped segment of isoquant is economically feasible.

In figure 12, the segment P₁S₁ is the economically feasible portion of the isoquant for IQ. If we consider such feasible portions for all the isoquants, then the region comprising of these portions is called the economic region of production. A producer will operate in this region. It is shown in figure 12. The lines OP₁P₂ and OS₁S₂ are called ridge lines. Ridge lines may be defined as lines separating the downward sloping portions of a series of isoquants from the upward sloping portions. They give the boundary of the economic region of production.

Questions & Answers

Question: What does an isoquant mean? And what are its assumptions?

Answer: An isoquant is also known as isoproduct curve or equal product curve. There are four factors of production, namely land, labor, capital and organization. These factors of production are essential to produce any good or service. An isoquant is a curve that is derived from various combinations of any two of the four factors of production and represents same level of output. Though combinations of two factors change along the curve, the output remains constant. Thus, an isoquant helps a business to choose the best cost-effective combination of factors of production.

There are two important assumptions of an isoquant. Firstly, the technical conditions are constant. This means that there are no changes in the available production technology. Secondly, the two factors of production under consideration are combined as efficiently as possible.

Comments

Uzaif on August 15, 2020:

Good notes...

Thanking you,

Oyindamola Ayeotan on February 22, 2020:

Thanks for the comprehensive explantion

Abdulkerim Rago on February 15, 2020:

Great explanation sir IAM appreciate the you write.

Putradev on February 14, 2020:

I really appreciated the explanation Sir. Lovely explanation.

Love from Mauritius.

Severina mallo on February 07, 2020:

Good notes..... I enjoyed to study this because it is good for understanding...

Santosh Bhatta on January 08, 2020:

Remarkable explanation sir; you are Great!!!!!

Fuck boy on November 26, 2019:

Great explanation sir IAM appreciate the you write.

Zain-UL-Abdin Narejo on November 25, 2019:

this is very helpfull and easy to understand

Kenneth Adams on November 14, 2019:

Thank you so much. I love the explanation

Jannet dhaliwal on November 13, 2019:

Thanks

Hinsonkwakye on November 05, 2019:

How can i be economics best student

Nankya janat on October 18, 2019:

thanks really helpful

Kuki on September 30, 2019:

Thanks u

Rajneesh on September 18, 2019:

Very well explained and easy to understand

Purity on September 15, 2019:

You've made me understand economics, something that has always been a problem to me.

Many many thanks

Sandesh on September 11, 2019:

Thank uh sir...

I became satisfied with ur words

Thanks 4 making our study easy

Sisira Kumara on July 28, 2019:

thanks i learnt lot

Royce on April 22, 2019:

satisfied

Thanks on April 16, 2019:

Thanks

pallav on April 13, 2019:

Thank you

Sk Tiwary on January 02, 2019:

Thanku sir ji

Harsh on December 19, 2018:

Thank so much sir

Emerson on December 19, 2018:

Thank you sir...nice information..very useful..

ridhi jain on December 11, 2018:

a wonderful explanation

Rinki Saikia on December 06, 2018:

Thank you sir

sreyapauly on November 27, 2018:

More Explanations

Rajat Kumar.. on November 23, 2018:

This explanation ...is clear all my doubts about isoquant...

Thank u so much....

Nuthan Varma on November 10, 2018:

Nice information about the topic

Thanks sir

Except for on November 08, 2018:

Excellent

soham on November 08, 2018:

superb

Vivek on October 26, 2018:

Very lucid and nice explanation

PRANJAL JAIN on October 24, 2018:

thanks for helping us in very esay language.

Recommended for You

Hindu Funerals in Varanasi, India

The Witty and Wise Jane Austen: A Mini Biography

Prince John (1905-1919): The British Royal Who Most People Don't Know Existed

Naveen on October 23, 2018:

good explanation

Mahendra on October 12, 2018:

Thanks for explaining this concept ...

Rahmat ali on October 11, 2018:

V nice

Me on September 24, 2018:

Cool

Alfa on September 18, 2018:

Well explained

K. Hemalatha on June 08, 2018:

Thank u it was very easy to understand

Asif sheikh on May 30, 2018:

Vry Vry 9c explanation in easy words

Tysm

stylish wi on May 29, 2018:

Well defined

Nitesh Tiwari on April 09, 2018:

Thanks For very good explanation in easy way

Shweneemo on April 04, 2018:

Thank you so much for a very good and understandable content

Mafiza on March 28, 2018:

Thank you sir

Abc on March 14, 2018:

This is very complicated

rahuse on March 07, 2018:

thank u...good explanation

Nol B on February 14, 2018:

I love it, continue with the tradition

Hagai Maleko on February 11, 2018:

Nice one. Thanks a lot

Maira on January 30, 2018:

Thanks! Very easy to understand

nandu on January 21, 2018:

thanks

mulugeta on December 29, 2017:

Thanks for your help I have got enough information

Somnath nanda on December 26, 2017:

Very easy to understand and i like the explanation that's given.

Gayatri on December 01, 2017:

Very easy to understand

js ranjan on November 29, 2017:

Thanks

irum on November 21, 2017:

excellent i have learnt from it

mangulu on November 19, 2017:

Very short your language easy to understand Good I Like You

Mathew Odong Ongom on November 14, 2017:

Thanx so very much

Arbind Kumar on November 06, 2017:

Very well explained, short & crisp. Thanks

shreya on November 04, 2017:

Very good, language is cLear n understandable ...cry helpfull

Nikhil on October 29, 2017:

Outstanding job

manjusha on October 25, 2017:

this scale it is so easy to understand

Sandhya on October 22, 2017:

Thanks a lot for the easiest explanation..

Jahau Biaknia-the mizo on October 05, 2017:

I'm really satisfied to your explanation..easy way of understanding..thanks a million

Clement on September 12, 2017:

Very easy to understand

Jamela on September 04, 2017:

Detailed information

Nice presentation . Thank you

God bless you

Anarsha on August 31, 2017:

Good

Jigyasa on July 04, 2017:

Nicely explained for the beginners

Muna on May 23, 2017:

Easiest presentation ever! Thanks :) .....

Suman on May 01, 2017:

Thankyou very much...

Angel on March 14, 2017:

Very nice and detailed explanation and simple illustrations to understand easily.......thankq so much

It is very helpful to me

Feriha on March 12, 2017:

well defined

:) on March 11, 2017:

nice..

Kumuda on March 07, 2017:

Thank yu for the info.

saumya singh on February 28, 2017:

Nice........ micelleneous concept....thanks

Niphiya on February 03, 2017:

very helpful...........

shija pastory on February 02, 2017:

Understandable

Bibin on February 02, 2017:

This is really well explained and extremely simple to understand. Thanks a lot.

MADHUSUDHANA P NAYAK on January 01, 2017:

very easy to understand......

xyz on December 30, 2016:

thanx alot this is very much helpful to me :)

priya yadav on December 16, 2016:

Its really helpful

ndfaho on December 10, 2016:

cool ...good explanation

malathi on December 08, 2016:

some other information is add for hel

Saket on November 30, 2016:

awesome explanation it helps a lot....

Kartik chauhan on November 23, 2016:

Well and good presentation with diagram

110830@student.umyu.ed.ng on November 10, 2016:

Rilly proud to be an economist nice article

namratavighne@gmail.com on November 08, 2016:

thank you

michael .M.Dlamini on November 02, 2016:

it exceptionally well explained

hitesh uttam on October 03, 2016:

beautifully explained

HArShiL on September 08, 2016:

Nice & osum pls something also be include in this

sharon bule on August 09, 2016:

very helpful explanation ..... thanx

daya on July 26, 2016:

thanks for our great support

mesbah on June 17, 2016:

thanks its supported me

Ali Said on March 27, 2016:

Thankx al;ot

nanda on February 08, 2016:

Thank u ..

Sir....

waqar on December 31, 2015:

Thanks a lot sir

Prashant pandey on December 05, 2015:

Its a grt explanation nd very helpful 4 all....thnx alot

Jabbar Ul Haq Malik on October 30, 2015:

thank you so much sir g it is very helpful for me

Mayank on October 21, 2015:

Informative

Pranav Unnithan on October 14, 2015:

really helpful

Sandeep on October 12, 2015:

Thanks it is very helpful for me

Catherine on August 04, 2015:

Thanks a tonne!